Green Innovation and Energy Efficiency: Moderating Effect of Institutional Quality Based on the Threshold Model

Chaoyi Chen, Mehmet Pinar and Rocío Román-Collado
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Rocío Román-Collado: Universidad de Sevilla

Environmental & Resource Economics, 2024, vol. 87, issue 12, No 1, 3063-3094

Abstract: Abstract Recent studies demonstrated that green innovation and environment-related technologies reduce energy intensity and improve energy efficiency, contributing to the reduction of carbon emissions. However, the existing studies employ linear estimation methods to examine the relationship between green innovation and energy intensity and do not consider the indirect implications of institutional quality for the effect of green technology on energy intensity. Institutional quality is found to be an essential driver of innovation, and countries may need to achieve at least a minimum level of institutional quality to promote green innovation and improve their energy intensity. To test this hypothesis, this paper examines the relationship between energy intensity and green innovation using a panel dataset from 72 countries between 1996 and 2017 and a panel threshold model when institutional quality is considered a threshold variable. The findings highlight that green innovation reduces the energy intensity if and only if countries surpass a certain threshold of institutional quality. Therefore, countries need to improve their institutional quality to promote green innovation and benefit from green technologies in improving their energy intensity.

Keywords: Green innovation; Energy intensity; Energy efficiency; Institutional quality; Threshold model (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10640-024-00902-w

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